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America, China in US$ 4bn Uganda refinery deal race

Kampala, Uganda | HAGGAI MATSIKO | President Yoweri Museveni and technocrats at the Energy Ministry are set to pick an investor for Uganda’s $4 billion refinery but details of what is emerging from negotiations and due diligence meetings is troubling.

Insiders say the in-fighting, intrigue and lobbying that has undermined previous infrastructure projects is as expected threatening Uganda’s biggest infrastructure project.

Cabinet officials, President Museveni’s relatives, diplomats and senior technocrats at the Energy Ministry are being named amongst those lobbying and jostling for competing companies.

Early May, Energy Minister Irene Muloni said that the government had four consortia from which they would pick the contractor. At the time, the mentioned names were; China’s Guangzhou Dongsong Energy Group, Spain’s Profundo, Yatra Ventures from the U.S. and IESCO of Turkey. A consortium led by Uganda’s Bantu Energy was also mentioned.

But as of now, the consortia have been whittled to just two—Dongsong Energy Group and America’s Yantra Ventures with key negotiations to pick the winner expected towards the end of July.

This is the closest technocrats have come to getting a potential investor for the 60,000 barrels per day refinery since the Russian company, RT–Global Resources, which claimed to be ready to pump US$ 1 billion into the project pulled out of the deal mid-last year. Even South Korea’s SK which had been the alternate bidder also never picked interest in the negotiations after that setback to government.

“The deal breaker for the South Koreans was money,” the official said on conditions of anonymity, “they wanted to invest only 30 percent of the money yet government was looking for an investor that would invest 60 percent and the Russians were ready to do this.”

The Independent has, however, been told that Museveni favoured the Russians because dealing with them could potentially involve a bonus – access weapons. President Museveni could have handed the deal to his Chinese business-buddies but he possibly opted to spread his sources of development finance to Russia. In this sense, the Ugandan leadership was counting on Russia’s world superiority as a counterweight to both the western powers; mainly America, and China.

Indeed, in the same year the government picked RT Global Resources as the best bidder for the refinery is the same year the Ugandan government entered an arms contract with the Russian firm, Rosoboronexport, which oversees all exports.

This contract resulted in the delivery of a VIP version of the Mi-171E helicopter to the Ugandan government in February this year from Russian Helicopters, which is part of Rostec Corporation, and is the only developer and manufacturer of helicopters in Russia. But now it appears picking the Russians might have been a blunder.

Uganda desperate?

With the Russians out, Uganda has appeared somewhat desperate. The Independent revealed last year that a shadowy international company registered in the British Virgin Islands (BVI), a major international tax haven, whose directors were not clear, had also ended up high on the list of those government was courting.

The Company, Burj Petroleum, had offered to invest 100 percent in the refinery, retain a stake of 80 percent and offer government 20 percent free of charge. This raised major concerns in the sector and the company was later dropped.

Interestingly, government appears exactly back where it was two years ago when it was trying to pick the investor who would take a 60 percent stake between the consortia led by Russia’s RT Global Resources and South Korea’s SK Group.

This time, however, the two candidates are from the U.S and China. And the process has already thrown up enough controversies. For one, While Yantra Ventures is the leader of the consortium, all the good buzz is about American giant, General Electric.

Given the competition amongst lobbyists for the competing camps, all sorts of claims are being thrown around. Proponents of the Yantra Ventures camp are fronting GE given its clout. With assets worth over $300 billion, GE is one of the biggest companies in the world. In 2016 alone it made revenues worth $ 123 billion or five times more than Uganda’s Gross Domestic Product (GDP). They claim their camp is in the lead to bag the deal.

Insiders say diplomats at the American Embassy are also excited about the deal. Apparently, a former USAID employee is at the centre of the deal. The Independent could not confirm if that is a reference to Grace Tukahebwa, who is listed as Yantra ventures key contact in confidential documents that The Independent has seen.

On top of the hype for their camp, Yantra Ventures handlers are also presenting their competition Dongsong as incapable.

China’s Dongsong Energy Ltd is already developing the $620 million Usukuru phosphates project in Tororo, eastern Uganda. But it has mostly struggled to raise the finances for the venture. However, in its consortia for the refinery, it has China’s giant, SINOPEC; the chemical and petroleum conglomerate said to have up to US$1.5 trillion worth in assets. SINOPEC’s financial muscle makes GE’s US$300 billion insignificant.

Dongsong’s handlers are also questioning whether America’s giant GE is the one really in the Yantra consortium or whether its big name is not being bandied around to impress. When The Independent wrote to GE to clarify on this issue, an official requested for time to give a response.

But those closely watching the two consortia claim they all have red flags around them and need to be dealt with cautiously.

3 comments

  1. Typical of Ugandan public purchases. New vendor evaluation team, New set scorecards and new technical opinions of technocrats to sort the troubles. Lobbying should be highly prohibited and culprits should be referred to government investigation institutions. If not well handled, the project will be a laughing stock in the EAC block. GOD help Uganda.

  2. James jones bantu

    Andrew I want to if the two deals are connected or they independent from each other. The pipeline deal and the refinery. I want to point out that building a refinery alone can cost less than £200 million, so where that that figure of 4 billion us dollars come from, it’s pretty cheap to construct a refinery. Unless you tell me that it’s the same company building a refinery and the pipeline for that some 4 billion, still alot of mone to dish out to a foreign company. I think ugandans can now appreciate my argument that we need to quickly invest in knowledge creation rather than wealthy creation that Mr museveni is pre ocupied with. We should use local talent to build those projects handed to foreign companies. Think again ,Mr museveni think about creating local knowledge .

    • My question is if we have a Ugandan company(bantu energy) that’s willing to invest in this project why are we looking at other investors

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